Digital commerce M&A strong in 2019, but faces Covid-19 challenge in 2020

The global digital commerce mergers and acquisitions (M&A) market had a strong finish to 2019, with 778 disclosed transactions in the second half, according to a recent sector report from Hampleton Partners, a London-based technology M&A advisory firm.

The second half saw increased activity from H1 2019, which had 664 transactions. H2 2019 also saw an uptick in disclosed transaction value, reaching a record $94.5 billion.

The digital commerce sector saw more than a dozen multi-billion dollar deals in H2, including Charles Schwab’s acquisition of Ameritrade ($26.3B); Flutter’s merger with The Stars Group ($11.3B); and Takeaway’s merger with Just Eat ($8.6B). The median deal size in the past 30 months, however, was $26 million.

The digital commerce sector includes internet services & platform solutions; online retail; media, social & gaming agencies & service providers; and digital commerce software.

Digital commerce M&A strong in 2019, but faces Covid-19 challenge in 2020

“In the second half of 2019, the digital commerce space continued to see peak levels of M&A in terms of transaction volume, disclosed deal value and company valuations,” said Ralph Hübner, sector principal, Hampleton Partners. “E-commerce and digital marketing are more than ever turning into one mature, consolidating sector. ‘Digital commerce’ is the new normal if we consider the overlap between digital marketing and e-commerce in fields such as social commerce, retail marketing, or indeed if we consider marketing giants expanding into e-commerce software, as illustrated by Adobe’s acquisition of Magento in 2018.”

Hübner adds that retailers aiming to boost revenues and customer loyalty are focusing on digital marketing solutions like CRM and AI to better analyze their customers and tailor their marketing.

The most popular segment was internet services & platform solutions, which accounted for 36% of deal volume in H2 2019. Online retail was the runner-up, representing 29% of M&A deal volume in the digital commerce sector.

The Covid-19 outbreak means that digital commerce M&A market is very uncertain in 2020 – with retailers dealing with drops in spending and consumption, as consumer eschew non-essentials in a cratering and movement-restricted economy.

“In the long term, however, we believe that more mature companies will grow into sought-after targets and traditional brands and retailers will show big demand for digital channels overall,” Hübner said. “Also, aside from conferencing software and other remote IT & business solutions, which are currently in high demand for obvious reasons, we believe that e-commerce will be in pole-position once demand picks up again after the storm.”

As such, Hübner says the digital commerce sector will see a stronger-than-average comeback when the health crisis subsides and tech M&A picks back up.

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